Even the IRS understands life happens. That’s why the government offers IRS debt forgiveness when you can’t afford to pay your tax liability
Under certain circumstances, taxpayers can have their tax debt partially forgiven. When the IRS considers forgiving your tax liability, they look at your present financial condition first. This means the IRS can’t collect more than you can reasonably pay. If any collection action would force you into a financial crisis, the IRS can’t collect the back taxes.
Pay Less Than You Owe with Offer in Compromise
If you have the resources to pay a partial amount of their tax debt, there’s still hope. You can apply for the IRS government payment plan called an Offer in Compromise (OIC) to resolve the remaining amount. Depending on your financial capacity and upon acceptance, the IRS significantly reduces the total debt that you can pay. This reduced amount can be paid in a lump sum or in fixed monthly installments.
See If You Qualify for the IRS Fresh Start Initiative
To make it easier for taxpayers to qualify for an OIC, the IRS has expanded their Fresh Start initiative. Now, you won’t have to disclose extensive financial details to the IRS to judge your paying ability. The Fresh Start initiative makes it easier to afford your IRS tax payments.
- The IRS now looks at only one year of future income for offers paid in five or fewer months when determining your collecting potential. This is down from the previous five years. For agreements of six to 24 months, the IRS now looks at two years of future income instead of the previous five years.
- Taxpayers are now allowed to make their student loan’s minimum payments for post-high school education loans guaranteed by the federal government.
- Taxpayers may, under certain conditions, pay delinquent federal and state or local taxes in monthly installments if they cannot pay it in full.
- The IRS has expanded the Allowable Living Expense standards. This allowance now includes credit card payments, bank fees and charges, and other miscellaneous allowances.
What’s Next If You Owe Tax Debt?
Understanding your tax debt and dealing with the IRS isn’t easy to do alone, even with available programs like Fresh Start. Fortunately, there are professionals who can help you navigate your options.